Inac The only people who are interested in (2024)

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InacThe only people who are interested in purchasing flood insurance are those in flood-prone areas where the likelihood of incurring a flood loss is high. This means the flood exposure is subject toA) adverse selection.B) indemnity.C) the law of large numbers.D) subrogation.

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The correct answer is B) indemnity. The question states that the only people interested in purchasing flood insurance are those in flood-prone areas where the likelihood of incurring a flood loss is high. This means that the primary purpose of flood insurance is to provide indemnity, or financial compensation, to policyholders in the event of a flood.#### Solution By Steps***Step 1: Identify the key information in the question***The question states that the only people interested in purchasing flood insurance are those in flood-prone areas where the likelihood of incurring a flood loss is high. This suggests that the primary purpose of flood insurance is to provide financial protection or indemnity to policyholders.***Step 2: Evaluate the answer choices***A) Adverse selection: This refers to the tendency of higher-risk individuals to seek out insurance coverage, which is not the primary purpose of flood insurance.B) Indemnity: This is the correct answer, as the purpose of flood insurance is to provide financial compensation to policyholders who suffer a flood-related loss.C) The law of large numbers: This refers to the statistical principle that the larger the sample size, the more accurate the predictions. While this is important for insurance, it is not the primary purpose of flood insurance.D) Subrogation: This refers to the insurance company's right to recover payments made to the policyholder from a third party. This is not the main purpose of flood insurance.#### Final AnswerThe correct answer is B) indemnity. The primary purpose of flood insurance is to provide financial compensation or indemnity to policyholders who suffer a flood-related loss.

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